Deed of Sale Validity and the Presumption of Regularity in Notarized Property Transactions

The Supreme Court recently settled an important dispute over the validity of a notarized Deed of Absolute Sale, reaffirming the evidentiary weight given to notarized documents in property transactions. In Chingkoe v. Chingkoe (G.R. No. 244076, March 16, 2022), the Court reinstated the trial court's ruling that a notarized deed of sale is presumed regular, authentic, and duly executed—a presumption that can only be overturned by clear and convincing evidence.

The case involved siblings Faustino and Felix Chingkoe over a property in Quezon City. Felix claimed he purchased the property from Faustino for P3,130,000.00 in 1994 through a notarized Deed of Sale. Faustino, however, alleged that he only signed the document to appease Felix, at the insistence of their mother, and never intended to sell the property.

The Dispute Over the Deed of Sale

The Regional Trial Court (RTC) ruled in favor of Felix, declaring the existence and due execution of the Deed of Absolute Sale. The RTC held that the testimony of the parties' mother failed to overturn the presumption of regularity of the notarized document. The notary public also testified that both parties appeared before him when the deed was notarized.

On appeal, the Court of Appeals (CA) reversed the RTC's decision. The CA gave credence to the mother's testimony that Faustino only signed the deed to appease Felix without intending to sell the property. The CA also held that Felix failed to prove payment of the contract price, rendering the contract void for lack of consideration.

The Supreme Court's Ruling

The Supreme Court reversed the CA and reinstated the RTC's decision. The Court emphasized that notarized documents enjoy the presumption of regularity, which can only be overturned by clear, convincing, and more than preponderant evidence.

The Court found that the mother's testimony was insufficient to overcome this presumption. Her testimony consisted of repetitive and unresponsive answers, and she admitted she could not read the document, did not know about the contract price, and "did not pay too much attention to it." She was not present when the deed was signed or notarized and had no part in its preparation.

Key Principles on Notarized Documents

The Court reiterated several important principles regarding notarized documents and contracts:

Presumption of regularity. A notarized document carries with it the presumption of regularity, authenticity, and due execution. Without clear, convincing, and more than preponderant evidence to controvert this presumption, the evidentiary weight conferred upon such public document stands.

Trial court's advantage in assessing witnesses. The evaluation of witnesses and their testimonies is best undertaken by the trial court because of its unique opportunity to observe witnesses firsthand and note their demeanor, conduct, and attitude under examination.

Signing a contract means knowing its contents. One who signs a contract is presumed to know its contents, especially if the person who signed caused the preparation of the document.

Simulation of Contracts Under the Civil Code

The Court also addressed the CA's conclusion that the deed was an absolutely simulated contract. Under Articles 1345 and 1346 of the Civil Code:

• Absolute simulation takes place when the parties do not intend to be bound at all, making the contract void.
• Relative simulation takes place when the parties conceal their true agreement, which binds the parties to their real agreement if it does not prejudice third persons or violate law, morals, good customs, public order, or public policy.

The Court found that Faustino's own testimony showed he fully intended to be bound by the deed. He admitted that his staff prepared the document, that he and his wife voluntarily signed it, and that he committed to his mother that the house would eventually go to Felix.

Non-Payment vs. Lack of Consideration

The Court clarified an important distinction: failure to pay consideration is different from lack of consideration. Actual payment is not one of the three essential requisites of a valid contract under Article 1318 of the Civil Code (consent, object, and cause). Non-payment does not render a contract void; the remedy of the injured party is to demand fulfillment or rescission of the obligation.

In this case, the deed itself stated that the purchase price was "paid in full" and the receipt was acknowledged. Since Faustino failed to overturn the presumption of regularity, the attestation of payment in the notarized deed sufficiently proved full payment.

Practical Takeaways

• Notarized documents carry significant evidentiary weight. A notarized deed of sale is presumed regular, authentic, and duly executed. To challenge it, a party must present clear, convincing, and more than preponderant evidence—not just flimsy excuses or uncorroborated testimony.

• Be careful about signing documents "for appeasement." The law presumes that one who signs a contract knows its contents. Courts will not relieve parties from the effects of agreements they entered into with all required formalities and full awareness of what they were doing.

• Understand the difference between non-payment and lack of consideration. Failure to pay does not automatically void a contract. The injured party's remedy is to demand fulfillment or rescission, not to claim the contract never existed.

• Trial court findings on witness credibility are highly respected. Appellate courts generally defer to the trial court's assessment of witness credibility, as it has the unique opportunity to observe witnesses firsthand.

• Actual damages require proof. Claims for unrealized profits or lost business opportunities must be supported by receipts, documents, or other competent evidence. Courts cannot rely on speculation or guesswork in awarding actual damages.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.